The Treasury Department has fined the oil and gas giant Exxon
Mobil $2 million for violating US sanctions on Russia — and
the violations occurred while Secretary of State Rex Tillerson
was CEO of the company.

The Treasury
said that Exxon violated the sanctions between May 14
and May 23, 2014 "by signing eight legal documents
related to oil and gas projects in Russia with Igor
Sechin, the President of Rosneft OAO, and an individual
identified on OFAC's [Office of Foreign Asset Control] List
of Specially Designated Nationals and Blocked
Persons."

The Obama administration previously issued an executive
order that imposed sanctions on Russia in response to the
country's invasion of eastern Ukraine and seizure of the
Crimean peninsula. Some of the sanctions
leveled on Russia include the prohibition of technology
transfers in Russian energy projects in the Arctic, Siberia, and
the Black Sea. Sanctions also prohibit dealings with Rosneft CEO
Igor Sechin.

"OFAC determined that ExxonMobil did not voluntarily
self-disclose the violations," the Treasury said,
"and that the violations constitute an egregious
case."

According to the Treasury, Exxon's defense was that the company
believed the sanctions established a "distinction between
Sechin's 'professional' and 'personal' capacity," but the
department insists that "no materials issued by the White House
or the Department of the Treasury asserted an exception or
carve-out for the professional conduct of designated or blocked
persons."

Business
Insider

The Treasury concluded that Exxon "demonstrated reckless
disregard" when it dealt with Sechin, who was known to
ExxonMobil's senior-most executives as a sanctioned entity. The
department added that Exxon "caused significant harm to the
Ukraine-related sanctions program objectives by engaging the
services" of Sechin, who is "contributing to the crisis in
Ukraine."

Exxon said in a statement that "OFAC’s action is
fundamentally unfair" because it is "trying to
retroactively enforce a new interpretation" of the initial
executive order.

"ExxonMobil followed the clear guidance from the White
House and Treasury Department when its representatives signed
documents involving ongoing oil and gas activities in Russia with
Rosneft — a non-blocked entity — that were countersigned on
behalf of Rosneft by CEO Igor Sechin in his official
representative capacity," the company said.

The Wall
Street Journal reported in April that Exxon had
applied to the Treasury Department for a waiver from
sanctions on Russia in an effort to restart its joint
venture with Rosneft. The firm applied for a
waiver to proceed in the Black Sea, according to people familiar
with the matter.

It is unclear whether the waiver request to the Treasury
Department came before or after Tillerson joined the
administration. But Tillerson has close personal ties with Russia
and has struck several major deals with Rosneft in the past. He
also received the Order of Friendship award from President
Vladimir Putin in 2013.

Exxon and Rosneft signed
a landmark deal in 2012
under Tillerson's leadership to explore Russia's
arctic and its portion of the Black Sea, as well as drill in
Siberia.

One key casualty of the sanctions on Russia ended up being the
Kara Sea inside the Arctic Circle.Back
in September 2014, Rosneft discovered oil there with Exxon;
however, due to the sanctions, they could not continue the
landmark joint exploration. This proved to be problematic for
both parties: Rosneft does not have the technological ability to
drill in cold offshore conditions by itself, while Russia was
Exxon's second-biggest exploration area at the time.

Tillerson's close relationship with Russia and Putin
has previously led
to speculation that as secretary of state he could push
for sanctions on Russia to be lifted — allowing Exxon's
Arctic agreement with Rosneft, reported to be
worth $500 billion, to proceed. Meanwhile,
the head of Exxon's operations in Russia, Glenn
Waller, said
last April that the company will return to its
joint project with Rosneft once sanctions against Moscow are
lifted.

In his confirmation hearing, Tillerson testified,
"I never lobbied against the sanctions. To my knowledge, Exxon
Mobil never lobbied against the sanctions. Exxon Mobil
participated in understanding how the sanctions were going to be
constructed. And was asked and provided information regarding how
those might impact American business interests."

A "person familiar with the matter" told the Journal that Exxon
has been seeking permission from the US to drill in areas
affected by sanctions since late 2015.

Regarding the Black Sea region, the Journal also reported that
Exxon "needs" a discovery of oil in the area by the end of the
year in order to receive a license from the Russian government to
drill under the terms of the Rosneft deal, according to the
Journal. A "person briefed with the company's waiver application"
said that "Exxon is worried it could get boxed out of the Black
Sea by the Italians."